The truth is nobody really knows how oil is actually formed.
I would be perfectly happy to be corrected on this...
4.1 Where does crude oil come from?.
The generally-accepted origin of crude oil is from plant life up to 3
billion years ago, but predominantly from 100 to 600 million years ago .
"Dead vegetarian dino dinner" is more correct than "dead dinos".
The molecular structure of the hydrocarbons and other compounds present
in fossil fuels can be linked to the leaf waxes and other plant molecules of
marine and terrestrial plants believed to exist during that era. There are
various biogenic marker chemicals ( such as isoprenoids from terpenes,
porphyrins and aromatics from natural pigments, pristane and phytane from
the hydrolysis of chlorophyll, and normal alkanes from waxes ), whose size
and shape can not be explained by known geological processes . The
presence of optical activity and the carbon isotopic ratios also indicate a
biological origin . There is another hypothesis that suggests crude oil
is derived from methane from the earth's interior. The current main
proponent of this abiotic theory is Thomas Gold, however abiotic and
extraterrestrial origins for fossil fuels were also considered at the turn
of the century, and were discarded then. A large amount of additional
evidence for the biological origin of crude oil has accumulated since then.